Temporary Injunction Standard In Trade Secrets Cases (Part I)

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

In INEOS Group Ltd. v. Chevron Phillips Chemical Co., LP, 312 S.W.3d 843 (Tex. App.–Houston [1st Dist.] 2009, no pet.) the Court of Appeals held that the trial court did not abuse its discretion by finding that the plaintiff-manufacturer was sufficiently vigilant in guarding its polyethylene manufacturing technology such that it was entitled to trade secret protection by a temporary injunction pending trial on the merits. In INEOS Group Ltd., the court observed that, on appeal, the scope of review is limited to the validity of the temporary injunction order. Id. at 848. The appellate court does not review the merits of the underlying case. Id. Instead, the appellate court determines whether there has been an abuse of discretion by the trial court in granting or denying the relief. Id. In making this determination, the appellate court may not substitute its judgment for that of the trial court unless its decision was so arbitrary that it exceeded the bounds of reasonableness. Id. Abuse of discretion does not exist if the trial court heard conflicting evidence, and evidence appears in the record that reasonably supports the trial court’s decision. Id. A trial court abuses its discretion in granting or denying a temporary injunction when it misapplies the law to the established facts. Id. Given the abuse-of-discretion-standard, the appellate court reviews the evidence submitted to the trial court in the light most favorable to the court’s ruling, draws all legitimate inferences from the evidence, and defers to the trial court’s resolution of conflicting evidence. Id.

The court noted that “when deciding whether to grant trade-secret protection through a temporary injunction, a trial court does not determine whether the information sought to be protected is, in law and fact, a trade secret; rather, the trial court determines whether the applicant has established that the information is entitled to trade secret protection pending the trial on the merits.” Id. at 853 (citing Sharma v. Vinmar Int’l, Ltd., 231 S.W.3d 405, 424 (Tex. App.–Houston [14th Dist.] 2007, no pet.)).

In this case, the main issue was whether the plaintiff had taken adequate steps to protect its trade secrets. The defendant argued that the plaintiff had not, and, therefore, its use of the alleged trade secrets was proper and the trial court had erred in enjoining it from using the alleged trade secrets. The appeals court disagreed. The court noted that the plaintiff introduced testimony that it is unaware that any of the expired secrecy obligations cited by the defendant actually resulted in the unauthorized public disclosure of its trade secrets and that the defendant presented no evidence to the contrary. The court observed that the vast majority of the licenses given by the plaintiff over the past 50 years regarding the alleged trade secrets contain perpetual secrecy clauses. The court also found it noteworthy that the plaintiff introduced evidence detailing the strict security measures it had implemented and maintained over the years to keep the at-issue technology confidential, aside from the secrecy agreements. Accordingly, the court found that trade secret protection was warranted at the temporary injunction stage. Id. at 854-55.

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